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Let’s Get Fundamental

If I were magically given an hour to help Barack Obama prepare for his health care speech next week, the first thing I’d do is ask him to read David Goldhill’s essay, “How American Health Care Killed My Father,” in the current issue of The Atlantic. That essay would lift Obama out of the distracting sideshows about this public plan or that cooperative option. It would remind him why he got into this issue in the first place.

Goldhill’s main message is that the American health care system is dysfunctional at the core. He vividly describes how the system hides information, muddies choices, encourages more treatment instead of better care, neglects cheap innovation, inflates costs and unintentionally increases suffering.

The essay is about the real problem: the insane incentives. Goldhill is especially good on the way the voracious health care system soaks up money that could go to education, the environment, economic development and a thousand other priorities. Health care, he writes, “simply keeps gobbling up national resources, seemingly without regard to other societal needs.”

This report also focuses on the key issue: perverse incentives. It’s got a series of proposals on how to restructure insurance markets, reorganize provider payments, change the way effectiveness-research findings are implemented and cap the employee tax deduction.

These aren’t pie-in-the-sky ideas. The authors have combed through the bills that are already out there. They’ve taken good ideas that are now in embryonic or neutered form. They show how the ideas would work if fully implemented. We’re not going to revolutionize 18 percent of the American economy overnight, but these proposals would put us on the path toward real reform.

We’re not on that path right now. Several months ago, President Obama made a promise: People with health insurance would be able to keep exactly what they have.

Photo

David Brooks

We all understand why he made that promise. He wanted to reassure people who are happy with what they’ve got. He wanted to mollify the industries that have a vested interest in the status quo.

But Obama’s promise sent the reform effort off the rails. It meant that efforts to expand coverage marched ahead, but efforts to fundamentally reform the system got watered down.

Instead of true reform we got a series of bills that essentially cement the present system in place. The proposals do not fundamentally challenge the fee-for-service system. They don’t make Americans more accountable for their own health care spending. They don’t reduce costs. They just add more people into the mess we’ve got.

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The president made this promise to ease passage. But it ended up hollowing out the substance of the reform. And the political benefits didn’t even materialize. Voters are still spooked by the costs, the centralization and the cuts they are sure will come.

If I had a magic hour with the president, I’d tell him this is his ninth-inning chance. He can stay on the current path. He might be able to pass some incremental bill that extends coverage. But he won’t have tackled the fundamental problems that first drove him to this issue. He won’t have cut health care inflation. He won’t have prevented a voracious system from bankrupting the nation, defunding the schools, pushing down wages and impoverishing the young.

On the other hand, he can shift back to the core issue: the perverse incentives that make this system such a mess. He can embrace proposals—like the Brookings proposals or, more comprehensively, the Wyden-Bennett bill — that address the structural problems instead of simply papering over them.

This remains a politically risky strategy. There are many industries that have an interest in making sure health care spending rises to 20 percent of G.D.P., and then 22 and then 24. But the president’s in political hot water already. He got there trying to dodge the hard issues. He might as well be there because he’s fighting for something real.

There are many people telling him to go incremental. They’re telling him to just enlarge the current system a bit and pay for it by pounding down a few Medicare fees. But did Barack Obama really get elected so he could pass the Status Quo Sanctification and Extension Act?

This is not the time to get incremental. It’s the time to get fundamental. Reform the incentives. Make consumers accountable for spending. Make price information transparent. Reward health care, not health services. Do what you set out to do. Bring change.

Paul Krugman is off today.

A version of this op-ed appears in print on , on Page A21 of the New York edition with the headline: Let’s Get Fundamental. Today's Paper|Subscribe